Tax-efficient sourcing and supply-chain management

Abstract

With such significant growth in the LNG industry and the broader energy and natural resources sector, the supply-chain risk and the cost of sourcing capital equipment and materials is increasingly difficult to manage. Many organisations are beginning to consider the merits of moving to a tax-efficient supply chain and procurement model, both through sourcing from a low-cost country and also centralising purchasing and supply operations in a tax-efficient location.

Tax-efficient sourcing integrates supply chain and procurement-operating model design with tax planning to deliver significant cost reductions and profit increases through centrally controlling procurement operations. The consideration of the most efficient tax structures to support sourcing and distribution of equipment also delivers.

Centrally controlled strategic and tactical supply chain and procurement operations in a tax-efficient location support an organisation in:

1. realising benefits through leveraging scale in operations and procurement;

2. designing a flexible framework that can be used to decide which categories of spending are managed globally, regionally, and locally; and,

3. the acceleration and sustainability of significant procurement savings delivery from low-cost locations.

Planning and management of the tax implications of physical supply-chain operations to reduce the actual taxes paid on profits and operations happen through:

1. the potential to reduce corporate taxes on company profits;

2. reducing absolute value-added tax (VAT) payable or cash-flow cost of VAT;

3. reducing duty payable;

4. optimising the indirect taxes paid on physical flows; and,

5. change of transfer pricing driving reduction in effective corporate tax rates.